Lean into growth, diversify and prioritize quality

Financial advisers are recommending that investors increase exposure to growth strategies while keeping diversified holdings and prioritizing quality. Growth exchange-traded funds have attracted about 30% more inflows than value ETFs so far in 2026. Market breadth has widened even as technology and AI-focused mega-cap names lead performance.

Over the past three years growth ETFs have outperformed value funds, driven by the so-called “Magnificent Seven”, the broader technology sector and the AI investment theme. That relative strength held versus the S&P 500 until 2026, when growth performance moderated and attention shifted to whether high-growth companies can sustain earnings to justify higher valuations.

ETF flow data show the 10 largest growth ETFs picked up roughly 30% more assets than the 10 largest value ETFs in 2026.

Second-quarter earnings season has brought focus to large-cap technology companies that benefited from elevated AI capital expenditures. Market participants are monitoring Q2 revenue and profit trends to assess whether results support current share prices. Some expect broader earnings gains across the rest of the S&P 500, a group sometimes referred to as the “493”, which could reduce concentration among the very largest firms.

Several ETFs apply selection rules to provide growth exposure while adding filters for profitability, valuation or analyst coverage. Examples include the Victory Shares Free Cash Flow ETF (VFLO), the American Century U.S. Quality Growth ETF (QGRO) and the Defiance KSM TipRanks Analyst ETF (RANK).

VFLO screens for companies with high free cash flow yields and projected cash-flow growth, and it excludes firms with weak profitability or heavy debt. The fund’s rules favor companies where cash generation is expected to expand.

QGRO uses a systematic process that combines high-top-line growers with companies showing consistent return on equity and steady balance sheets.

RANK combines analyst research on fundamentals with price-momentum signals to select companies with positive consensus earnings views and recent favorable price trends.

Index comparisons such as IVW versus IVE have tracked growth’s outperformance, and measures against the S&P 500 have shown growth resilience until the current year. Inflow patterns through 2026 indicate continued investor demand for growth exposure despite questions about concentration and valuation.

VettaFi is the index provider for the indexes underlying VFLO, QGRO and RANK and receives index licensing fees. VFLO, QGRO and RANK are not issued, sponsored or endorsed by VettaFi, and VettaFi has no obligation or liability related to their issuance, administration, marketing or trading.